USD/JPY failed to threaten 99.0 despite trading below the support level for a large part of US trading session. Price did manage to dip below 98.70, but was ultimately turned away by the rising Kumo Top, pushing price back above 99.0. That didn’t last long either, with price trading lower after hitting interim support turned resistance round 99.20.
Asian session saw price trading within a tight range between 99.0 – 99.2. Price has entered into the Kumo, but is also at the verge of breakout out. It is unlikely that price will be able to maintain above 99.0 and yet trade within the Kumo, hence something got to give eventually. Currently it seems that Kumo influence may win with a bearish candle forming just along the Senkou Span A. A break below 99.0 will open up next support around 98.2, which would also mean a bearish Kumo breakout if price does indeed reach such levels, suggesting that an acceleration towards next level of support around 97.2 and 96.6 may be possible. This scenario is supported with a potential bearish Kumo Twist in the making. Stochastic readings are also trending lower, in line with a downside scenario.
However, it is also possible that 99.0 may hold out longer than the Kumo. Furthermore, price does not need to rally very far from here to establish that, but rather simply maintain current levels. If 99.0 manage to hold till then, we could see Stochastic readings continue to trend lower before forming an interim trough around 50.0 mark. This would mean that a push higher is not entirely out of the window, though price may need to clear 99.7 before bullish acceleration towards 100.0 can be expected.
Daily chart shows the 1st bear candle since BOJ’s announcement last week. Price is still a distance away from the 261.8% Fib extension, though stochastic readings have already turned and peaking. If a bear candle is formed today (which will happen if price manage to trade below 99.0), we could see potential bearish acceleration towards 96.6, in line with the short-term bearish scenario with acceleration below Kumo. Fundamentals for long term USD/JPY remains the same as discussed with fundamental drivers for weaken JPY remains wanting. Nonetheless, bullish sentiment for USD/JPY remains strong, most likely due to speculators wanting to see the triple digit coming into fruition. This looks almost like the 100 USD oil speculation back in 2007. Price traded to the psychological 100 USD per barrel before tumbling down in spectacular fashion. Of course the Credit Crisis played a huge part back then, but we cannot deny the potential bearish sentiment that could creep into USD/JPY once 100.0 barrier has been breached.
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